Philippines faces bright prospects for 2013- Citi, HSBC raise growth forecasts for 2012

Aside from the PPP infrastructure agenda, the government is embarking on a ₱325-billion multi-year flood works and drainage program, a spending that is larger than the ₱233-billion cost of the PPP projects

The Philippines continued to generate positive economic forecasts from foreign institutions following a surprise third-quarter growth.

For this year, Citigroup raised its gross domestic product (GDP) growth forecast to 6.3 percent from 5 percent and to 6.1 percent from 5.3 percent in 2013, citing accelerated government spending and stable domestic demand.

British bank HSBC also revised its 2012 forecast to 6.2 percent from 5.7 percent although for 2013, the forecast was pared down to 4.9 percent from 5.7 percent given the continuing external headwinds.

Both Citi and HSBC expected the Bangko Sentral ng Pilipinas to keep its key interest rates on hold at 3.5 percent for the next policy rate-setting.

Minda Olonan, head of Philippine equity research at Citi, said the Philippines would benefit from more pronounced growth drivers such as excise tax reforms, accelerated bidding of key public-private partnership (PPP) projects and a credit-rating upgrade. She said public infrastructure could be the medium-term "game changer."

"Better fiscal health is enabling the government to be more proactive in stimulating the economy. Aside from the PPP infrastructure agenda, the government is embarking on a ₱325-billion multi-year flood works and drainage program, a spending that is larger than the ₱233-billion cost of the PPP projects. We believe this may lift the country's investment/GDP ratio that will eventually accelerate economic growth," she said in a Dec. 7 research.

Citi believes that banks, property, consumer, utilities and conglomerates will benefit from the investment spending dividend. The bank's top picks on a 12-month view are Ayala Land, SM Investments, Philippine Long Distance Telephone Co., Ayala Corp. and Puregold Price Club Inc.

HSBC economist Trinh Nguyen said a major force behind this year's growth has been the country's strong institutions, specially the BSP.

"Monetary officials have alleviated price pressures by successfully sterilizing capital inflows to contain money supply growth. Closely monitoring rice supply as well as bolstering food sufficiency policy has also helped," she said.

"A slowdown of inflation to 2.8 percent year on year in November in spite of accelerating growth reflects the institution's sound management of the economy," Nguyen said, adding that benign inflation has given monetary officials the space to cut rates by 100 basis points in 2012.

But Nguyen said the BSP was not the only champion behind the country's strong performance. "President Aquino's efforts to increase efficiency of fiscal spending and revenue collection gave the government the room necessary to counter-balance the global slump with increased expenditure. A look at the breakdown of growth shows that private consumption, government spending and investment have contributed to growth thus far in 2012," she said.

While external headwinds persist and likely drag down the Philippines' electronics exports, HSBC expects growth to remain robust in 2013 on the back of strong fiscal spending, low interest rates and resilient remittances.

She said monetary officials would likely hold rates at the next meeting to assess the impact of the recent acceleration in growth as well as the 100-basis-point cut so far this year. "Inflation will likely be benign in first half of 2013, thanks to contained food and oil prices, allowing the BSP to support growth," she said. "Though external conditions remain weak, strong domestic demand will keep the BSP vigilant and hold rates." (http://is.gd/B5MCqA)

Inquirer Business

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Philippines Coast Guard detains 2 Chinese Taiwanese fishing boats Poaching Philippine Territory

Manila, Dec. 11 (CNA) Philippines coast guard officers have detained two Taiwanese fishing boats for allegedly entering the territorial waters of the Philippines, Taiwan's representative office in that country confirmed Tuesday.

As of the press time, the two ships were being towed toward Mati, capital of Davao Oriental province, the office said.

The boats, registered in Tungkang, Pingtung County, both have Taiwanese skippers.

The Philippines coast guard said it intercepted and boarded the fishing boats Monday and found a large "illegal fishing catch."

Taiwan's representative office in the Philippines confirmed the statement, and said it is making every effort to negotiate with the Philippine government to secure the release of the boats and their crews.

Under Philippines law, the penalty for fishing in the country's waters is a fine of US$100,000 and seizure of the catch, fishing gear and boats.

In addition, the Philippines fishery bureau may impose an administrative fine of between US$50,000 and US$200,000. Failure to pay the fine could result in imprisonment of six to 10 years. (http://is.gd/VQbdlH)

Focus Taiwan 

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UBS-Switzerland revised projected Philippine Economy Growth to hiked up↑ 6.3 percent in 2012

Switzerland-based UBS revised upwards its growth projection for the Philippine economy this year to 6.3 percent from 5.8 percent previously on account of the government's upward revision on the second quarter growth.

"This is noteworthy, the Philippine real GDP growth has only surpassed six percent five times since 1980, in 1988, 2004, 2007 and 2010," UBS said in its Asian Economic Report where it dubbed Philippines by the Numbers dated yesterday.

UBS eyes a 4.5 percent growth for the country in 2013 and 4.9 percent in 2014.

The domestic economy grew by 7.1 percent in the third quarter, the highest in ASEAN and second in Asia after China's 7.4 percent growth.

Although growth in the first half this year was upwardly revised to six percent, the higher end of the government's five to six percent growth 2012 target, the UBS report projects domestic growth to register a slower growth in the second half due to weak exports "before recovering modestly in 2013."

"Moreover, although we expect an improvement in trade growth during 2013, lead indicators of trade activity and domestic activity suggest the tail end of the year may be a little below par," it said.

UBS also expects private consumption expenditure to remain strong going to 2013 due in part to moderate inflation but said that risks remain because of negative developments overseas that will impact on Filipino workers overseas and their remittances as well as higher global food prices that can impact on local prices.

Meanwhile, exports are expected t recover in 2013 while imports are projected to grow stronger "due to favorable domestic demand conditions."

UBS projects inflation to average at 3.2 percent this year and increase to 4.1 percent next year given the higher food prices on account of among others weather-related factors and higher global commodity prices.

As of November, rate of price increase slowed to 2.8 percent from month-ago's 3.1 percent bringing the average in the first 11 months this year to 3.2 percent.

The government' inflation target for this year until 2014 is three to five percent. (http://is.gd/b3NVvy)

Visayan Daily Star

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